Ping An Healthcare Updates Lower Revenue Growth for 2022; Outlook Muddled; FVE Kept at HKD 18

We retain our fair value estimate of HKD 18 for Ping An Healthcare after the company indicated 2022 revenue will likely come in at CNY 6.1 billion. This is lower than its prior guidance of CNY 6.5 billion, given back in third-quarter 2022. This translates to a 16% year-on-year decline versus our previous estimate of a 12% decline. It appears widespread pandemic controls affected Ping An Health more than we expected in the second half of 2022. Despite an increase of 400 corporate clients during the year, average revenue per corporate client decreased to CNY 2,000 compared with CNY 4,100 in 2021 in our model—given weak spending sentiment for healthcare and checkup services, in our view. We think gross margin in the second half of 2022 should be flat versus the first half. While we believe both revenue growth and gross margins would modestly rebound in 2023 with the removal of COVID-19 measures, we view that these catalysts are already incorporated in the current valuation. We believe that the temporary spike in valuation during December 2022 was frothy and reaffirm our view that the lack of short-run catalysts will continue to pressure its valuation.